Off-the-plan considerations

By Jessica Darnbrough 30 November 1999 | 1 minute read

There are many advantages of buying property off-the-plan but it requires a cautious approach.

Buying a new home or an investment property off-the-plan is a popular purchasing method for many Australians.

A significant advantage is that it enables you to tap into tomorrow’s market at today’s price.

This of course works best before a property boom or when the market is widely believed to have hit the bottom – which leaves plenty of room for price growth. If you do manage to buy into the right market at the right time, this can generate fantastic returns.

Another upside of buying off-the-plan is that it generally does not require too much financial commitment up-front.

Most developers require a 10 per cent deposit to secure the property while the remaining balance is not required until the property is complete. This can give you anywhere between a few months and a couple of years to save hard to help reduce the amount you’ll need to borrow when it comes to taking out a mortgage.

This strategy can be ideal for investors who don’t want to tie up too much of their capital but can still secure what they hope will be an appreciating asset.

Purchasing off-the-plan is also a popular strategy for those who do not want the stress of building a property themselves yet would like to live in a brand new home. There are also tax advantages of purchasing a new property, if it is an investment: you can claim on the depreciation of the building and its fittings.

While this all sounds promising it’s important to tread with caution when it comes to buying off-the-plan.

If the market takes a downward turn before your property is finished you may be left with a lemon that does not produce returns for some time. Be absolutely sure to do your homework on the property market and purchase in an area that is most likely to offer growth potential.

There are also risks that your developer may go bust or may not be a professional operator. Make sure you choose a developer with a reliable track history, or better still, one that has been recommended by a satisfied customer.

The last, but most obvious downside of buying off-the-plan, is that you are buying something you cannot see. This is always a risk. But you can do your best to ensure your purchase is what you hope by thoroughly examining all plans and documents and enlisting the expertise of a legal adviser to ensure you are not signing up to anything you don’t want to.

Off-the-plan considerations
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